up production. The Cabinet Committee on Investments has also been fast-tracking stalled projects; however, as most of these are infrastructure projects and have long gestation periods, the impact of these measures will not be felt until 2014-15,” it added.
Commerce secretary SR Rao mainly blamed “an unplanned maintenance shutdown at Reliance Industries” for the 16% drop in petroleum exports – a major contributor to overall exports – last month, hinting at better times ahead. The trade deficit has also narrowed so far this fiscal at $110.04 billion, compared with $146.82 billion in the year ago period. But a 22.6% plunge in non-oil imports – the fourth straight monthly fall above 20% – and a 15.3% drop in overall inbound shipments in December point at a pronounced slowdown in industrial demand, caused by factors other than a weak rupee and a crackdown on gold purchases from overseas.
Since the government is planning major cutbacks in spending to meet the fiscal deficit target, the scope of stimulating growth through public investments seems squeezed. This means unless private investments are front-loaded, optimism about an economic recovery is far-fetched. However, with the focus on inflation control by the RBI and now the government, analysts don’t see any loosening of the benchmark lending rate by the central bank soon to encourage investments. Consumer inflation last month surged to 11.2%, led by a 14.72% rise in food and beverage prices. Analysts expect the the wholesale and consumer prices data to be released next week to show some moderation since vegetable prices have eased.
“The problem is that the demand situation remains abysmally weak. An 8.7% drop in consumer goods output, mainly the 21.5% contraction in consumer durables, even in the supposedly peak festival season month, suggest that people are just not spending. So we don’t see any economic revival at this stage,” said CARE Ratings chief economist Madan Sabnavis.
During April-December, exports stood at $230.3 billion and imports at $340.3 billion, while the trade deficit was about $110 billion. Merchandise trade deficit widened slightly in December 2013 to $10.1 billion from $ 9.2 billion in November. Overall, trade deficit for Q3 of FY14 at $ 29.9 billion is at the same level as in Q2 FY14. Given this, and with service export growth in Q3 expected to be at least similar to that in the second quarter (in line with global recovery), India’s current account deficit is expected to